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Alternative Market Briefing

InvestorAnalytics highlights the myths of risk aggregation in new white paper

Tuesday, October 02, 2012

Bailey McCann, Opalesque New York:

US-based risk management firm InvestorAnalytics, has released a new white paper focused on uncovering the myths that investors commonly believe in when it comes to risk aggregation. "We have been at this for so long, and seen the same behavior over and over we wanted to assess the repeat problems," says Damian Handzy, CEO, InvestorAnalytics in an interview with Opalesque.

The three myths tackled in the paper include: choosing a risk aggregator based on the number of managers on the platform, attempting to get 100% coverage of all managers, and that using managed accounts means an investor doesn’t need to have a risk aggregator.

According to Handzy, the point of risk aggregation is to provide a clearer assessment of the real risks in a given portfolio. This data is important to both managers and investors but may not always be as complete or as specific as investors expect it to be – specifically because of data quality issues.

Data quality management is essentially a two-fold process that should take into account the qualitative – which managers are accounted for, and what they do, and the quantitative – is the data right, what data is it, and where are the holes. However, according to the paper, many investors are looking at the wrong factors when trying to compile and assess their data.

Risk aggregators in the past have noted the number of managers on their platform as a means of indicating completeness. However, that ......................

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